What has offshoring got to do with research universities?

Globalization is a fact of life for almost every large sector of the world economy. How this globalization will affect higher education is an ongoing theme of these blogs. One very visible component of globalization has been the outsourcing and offshoring movement. One generally thinks of this as a way to cut costs, and as such, this seems like a movement unrelated to the research and teaching missions of the university. However, a very interesting new book by John Hagel III and John Seely Brown, The Only Sustainable Edge, presents a different take on outsourcing and offshoring that could well have major implications for the way universities think about globalization.

Hagel and Brown describe a new type of networks of partners that leads to what they call accelerated capability building. The first component of their approach is based on process outsourcing and offshoring. They contend that outsourcing or offshoring simply to find lower cost providers is to miss the main benefit of the practice. Instead, they argue, both practices should be viewed as an opportunity to find the best providers worldwide of specialized capabilities that the home enterprise needs to support core operations. This then enables the home enterprise to focus on those core operations that differentiate it from its competitors, and increases flexibility to modify those core operations to maintain and even increase differentiation as conditions change (dynamic specialization). Thus, the practice enables both the home enterprise and the outsourcing partners to focus on, and increase, their core capabilities through dynamic specialization.

The second component of their approach focuses on the organization and structure of this global network of partners that will be created by this approach to outsourcing. To be effective, this network (the process network) must be organized in a way that provides efficiency, flexibility, and the opportunity for all partners to build capability rapidly in their own specialties. Not all of the partners in the network need participate in the same way or to the same degree in all projects. In fact, it is generally useful if the partners are free to belong to more than one network, because this increases their exposure to different problems and approaches. This then enables them to bring a new perspective back to the network.  The authors argue that the organization of the network should be “loosely coupled.” In this approach, relatively independent modules of activity are defined, and specific members of the network are given responsibility for those modules. The responsibility is defined primarily in terms of interface conditions with other modules, rather than by detailed instructions of how the module should achieve its desired outcomes. Consequently, each partner is encouraged to be as innovative as possible in meeting the interface conditions, and rewarded for creativity and efficiency in achieving those conditions. Extensive collaboration between groups responsible for different modules is greatly encouraged, since the modules must, in the end, "fit" together for the best overall outcome. Trust and shared meaning must be built among the partners in a conscious way, since one of the desired outcomes is a long term, highly flexible relationship. The process network is organized and managed by a process orchestrator. This is obviously a key position within the network, and one that is difficult to manage successfully.

The third component of their approach, which in many ways ties the components together in a virtuous cycle, is what Hagel and Brown call productive friction.  Bringing people together with different skills, backgrounds, languages and approaches to work together on a problem often produces misunderstandings. Hagel and Brown argue effectively the upside of this friction – working through these misunderstandings and arguments can lead to accelerated learning, increased innovation, and deeper trust.  They support their arguments with case studies drawn primarily from China. At the end of a project, all partners in the process network should walk away with increased capability in their specialized area – capability that can then be applied to another project involving perhaps different partners.  Once a reputation for accelerated capability building and innovation has been built by a process network, more enterprises will want to join.

Although this book looks at business, not higher education, it stimulates a number of reflections about the latter. The research university is about building capabilities – especially those in research. Many of us are also busy building capabilities in, for example, executive education for corporations – corporations that are now global rather than local. We also think about whom our students should be, and whether we have the capabilities to continue to reach them in times when foreigners are finding the U.S.less welcoming, and alternative sites for world-class education are increasing. So a plan that might lead to accelerated capability creation deserves our consideration.

I find it useful to look at some of the ideas contained in this book in the context of the world  of 2020 as viewed by the National  Intelligence Council  (see Feb. 17 blog,  The World in 2020): 

“ By having the fastest-growing consumer markets, more firms becoming world-class multinationals, and greater S&T stature, Asia looks set to displace Western countries as the focus for international economic dynamism…”

(Mapping the Global Future, p.11.)  The NIC does not suggest that the US will loose its place as the world’s largest economy in 2020, but rather that the higher growth rates of Asian economies combined with the buying power of the huge populations of the Asian nations will move the center of dynamism toward that region. Although the NIC applies all appropriate caveats to statements of this type, if one assumes it to be true, it clarifies to some extent the types of global partnerships that might be to our benefit in the future.

In such a world where S&T (science and technology) stature is shifting towards Asia, does it not behoove us to create partnerships with leading Asian research universities and technology corporations in order to increase our own research capabilities at the most rapid rate? If Asia becomes the focus for international economic dynamism, we will see a number of changes. For example, many of the international students who come to the US to study are motivated by the fact that the US is now the economic engine of the world. If the engine were to be located elsewhere, we would likely see a very significant dropoff in the number of the best and brightest international students. Should we pursue them? If so, it may well make sense to do so through partnerships with Asian universities, which understand local conditions and customs much better than we. In addition, the country or region that is the motor of the global economy will set many of the rules- just as the US has done in the past decades. For example, the NIC suggests that intellectual property rules in the future likely will be set by China and India, not the US (Mapping the Global Future, p.35). Thus, expertise for many of the things we now teach (in e.g. business, law, policy, economics) will be shifting to another part of the world. Again, does it make sense to obtain some of that expertise through partnerships with institutions (universities, corporations, governments) in Asia that may well be directly involved in the evolution of the ground rules?

It has never made sense to me to imagine that USC and, for example, the University of Tokyo would want to have an exclusive partnership, or even that a group of 15 universities around the world would want to have some type of exclusive partnership. Academe does not thrive by limiting its interactions. However, the model of Hagel and Brown tells us how to have non-exclusive partnerships that can benefit all partners. Thus, one might imagine USC being in a process network with several universities around the world that has the goal to provide executive business education globally.  If structured as outlined, this partnership would also provide an invaluable peer-learning experience for our own business faculty and those of our partners, thus increasing each of our capabilities. A process network of public health researchers from institutions in several countries could be well positioned to respond to requests for proposals from governments and agencies such as the World Bank. A properly constructed network would, of course, have a greater breadth of scientific expertise than would be available from any one institution. Perhaps more important, it should have a great breadth of cultural understanding that could greatly facilitate public health research in a variety of countries. In general, research process networks could enable each partner to specialize in some aspect of a broad field such as nanotechnology, while participating in a balanced, broadly based research program that could be very effective in obtaining grants from increasingly global funding sources.

Of course, all universities have relationships with numerous institutions, many in other countries. Many are paper relationships with no impact, others are of some significance. Multi-country, multi-institution research grants are not unknown. Huge numbers of faculty have their own relationships with researchers and institutions in other countries. What Hagel and Brown suggest is therefore not unheard of in academe. However, what their work does suggest is that real, significant global relationships may be a key component to building academic excellence in the years ahead, and they discuss some of the critical organizational elements of successful  capability-building relationships.